(RTTNews) - Friday, the Zurich-based think-tank KOF lowered Switzerland’s economic outlook for 2009. But, it raised the 2010 outlook citing the likelihood of a sustained economic recovery from mid-2010.

The research institute expects the Swiss economy to shrink 3.4% this year compared to June’s forecast for a 3.3% decline. Low inflation along with huge stimulus measures abroad, which are having a positive effect on demand for Swiss exports would help to improve economic conditions in the second part of 2009, KOF said.

The current stagnation is expected to begin giving way to a slow recovery in mid-2010. Now, the institute sees a small growth of 0.1% next year, while the previous estimate was a 0.6% contraction.

In its Autumn forecast, the KOF said GDP growth will reach 1.4% in 2011 compared to the previous year and the annualized growth rates would rise to around 2% towards the end of the forecast period.

Unemployment will continue rising for a few more quarters and will reach 5.4% towards the end of next year. The annual average unemployment rate will be 5.1% and salaries will stay stuck at the current level for the time being, the institute added.

According to KOF, consumer prices will fall 0.4% in 2009 due to the oil price collapse in the second half of 2008. Inflation in the coming year will hit 0.5%.

The KOF expects the Swiss National Bank to hold low interest rates for a fairly long period. Interest rates will only rise toward the middle of the forecast period, the institute said.

Considering all the influencing factors, the KOF is estimating a sustained economic recovery only as of mid-2010.

Last week, the State Secretariat for Economic Affairs had raised the economic forecast. The SECO sees a 0.4% growth next year after an estimated 1.7% contraction in 2009. Also, the central bank had revised its economic outlook for 2009 citing improvements in the global economy and at home. It now expects the economy to shrink between 1.5% and 2% this year.

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Posted in Categories: Economy, Releases, Switzerland.

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